Thursday, November 19, 2009

Here is the announcement and following a most interesting blog piece Is The Dollar " Good As Tungsten"? Check your local listings and stay tuned!

Dear Friend of GATA and Gold:

GATA Chairman Bill Murphy will be the guest on Bloomberg TV Asia's "Asia Confidential" program with moderator Bernard Lo from 10 to 11 p.m. ET Thursday. The show tried to get someone from the gold market establishment to debate Murphy about the specifics of the gold price suppression scheme, but, predictably enough, there were no takers.

Kitco gold market analyst Jon Nadler said he was washing his hair, Dennis Gartman of The Gartman Letter said he was still trying to find his, and World Gold Council Chairman Aram Shishmanian said he'd love to but had a conflicting appointment to interview several high-fashion models at a bar in London's Mayfair section for the council's forthcoming advertising campaign for gold body piercings.

So Lo just offered more airtime time to Murphy.

If you don't have cable television or your cable TV provider doesn't carry Bloomberg TV, don't worry too much. The program is likely to be placed on the Bloomberg TV archive, and we'll alert you to it there. We'll be grateful if any technically adept GATA supporter who gets Bloomberg TV and is capable of videotaping the show can post it at YouTube as well and then let us know.

A chief Austrian finding is that counterfeiting causes malinvestment. The fact that most counterfeiting is done by governments and called monetary policy does not change the consequences one iota. --Richard Maybury

Imagine if the Louvre crafted a near-perfect counterfeit Mona Lisa and hung it in the gallery behind bulletproof glass. Then imagine that the Louvre held a public auction selling the real Mona Lisa, but also refused to admit that the one in the gallery was a fake. Ridiculous! Isn't it?

In most cases a counterfeiter wants to pass off his work onto an unsuspecting and paying public or to a specific mark. This is true for works of art as it is for currency. The counterfeiter must make his work at least good enough to pass muster with the inteded mark.

But it is a special kind of counterfeiter that hides his deception as a prized possession within his own collection, only to sell the real thing in hopes of reducing its value. And I do mean special as in education, Olympics and central bankers.

Alan GreenspanThe Tungsten Story

I'm not going to say too much about this story yet because I am still skeptical. I'm not skeptical because it doesn't fit the context that we know. On the contrary, it almost fits too perfectly. But this, I think, is my main point in this post. What is most important as we observe this unfolding story is our clear understanding of the context that surrounds it.

We live today in a world of rampant fraud and misinformation. Not much is surprising. In fact, I fully expect some surprises which will DWARF this tungsten story. But still, so far this story relies on the credibility of only one analyst who has uncovered, and/or been given, some incredible information. If the story is true, then we will soon receive corroborating stories from other sources for reasons that I will discuss in a moment.

If this story turns out to be true, then the context discussed on this blog and delivered by ANOTHER 12 years ago explains it perfectly. This context stands alone and aside from this tungsten story. Also, if the story disappears or turns out to be false, it does not invalidate the pre-existing context that would have explained it.

Skepticism

Some believe this story is a myth because gold bars are melted down all the time to make coins, jewelry, or specialized gold disks for industrial plating used in commercial-grade electronics. This argument doesn't hold water with me. As I said in this comment, "You would not just set them loose on the market. You could not afford for them to get sold to the commercials who would melt them down..."

No, if this story is true then the delivery of tungsten bars to the Chinese was a fatal "leak". And not necessarily an accident.

What I am skeptical about is this part:

I know folks who have copies of the original shipping docs with dates and exact weights of “tungsten” bars shipped to Ft. Knox.

Not that Rob Kirby is lying, but this part of the story seems less likely to me. First of all, you would have to move the new gold in and the old (real) gold out at some point. It seems unlikely to me that you would do this in a way that would a) create shipping docs, and b) leave them existing in the hands of c) someone who was free to later talk about it to Rob Kirby.

I would like to see these documents released online to be scrutinized. I would be happy to release them here. ;)

The one other thing I would like to see before I attack this story with the deadly seriousness it deserves, is some sort of a corroborating story out of China that they indeed unearthed a tungsten scandal. Perhaps there already is one. If so, please post a link in the comments section!

The fact of the matter is that there should not have been any gold flowing in or out of Fort Knox during the mid-90's, let alone the whole enchilada. So "shipping docs with dates and exact weights" of the bars would be very interesting to see.

Larry SummersOn The Other Hand

On the other hand, like I said at the beginning of this post, the Kirby story fits the known gold manipulation paradigm perfectly. Let's have a quick review.

In his article, Rob Kirby says:

And here’s what the Chinese allegedly uncovered:

Roughly 15 years ago – during the Clinton Administration [think Robert Rubin, Sir Alan Greenspan and Lawrence Summers] – between 1.3 and 1.5 million 400 oz tungsten blanks were allegedly manufactured by a very high-end, sophisticated refiner in the USA [more than 16 Thousand metric tonnes]. Subsequently, 640,000 of these tungsten blanks received their gold plating and WERE shipped to Ft. Knox and remain there to this day.

The mention of Rubin, Greenspan and Summers especially caught my eye. It tells me that Rob is thinking the same as me if this story is really true. For the sake of this quick run-through, let's imagine the tungsten bar story is true.

If so, this epic journey of stupidity by these three men began way back at the beginning of the Great Depression in 1930 when John Maynard Keynes wrote in his "A Treatise on Money" that interest rates and general price levels (infation) were observed to be correlated. Keynes called this Gibson's Paradox.

John Maynard Keynes
58 years later, in 1988, while at Harvard University Larry Summerspublished a paper called Gibson's Paradox and the Gold Standard. In the paper he theorized that government bonds could be made valuable by manipulating the price of gold downward. GATA summarizes it like this:

Essentially, the scheme as implied by Summers' paper is to keep interest rates down and government bond prices up by rigging the gold market, gold and interest rates ordinarily being inversely correlated.

I've long had a hunch that the scheme became U.S. government policy because of President Clinton's resentment upon being told, soon after taking office, that the foremost objective of his administration should be to placate the bond market. There is a famous quotation about this in Bob Woodward's book about the Clinton administration's early days, "The Agenda." The full book isn't available on the Internet but the quotation appears in several reviews of the book that have been posted. Clinton says:

"We're Eisenhower Republicans here. We stand for lower deficits, free trade, and the bond market. Isn't that great? ... We help the bond market and we hurt the people who voted us in."

Bill Clinton
So Clinton was elected in 1992 and took office on January 20, 1993. Meanwhile Larry Summers, who is known for proposing brash ideas, had left Harvard in 1991 and joined the World Bank as Chief Economist. On April 5, 1993, less than three months after Clinton took office, Larry Summers left the World Bank to join the Clinton administration as Undersecretary for International Affairs in the Dept. of Treasury.

One month later, on May 18, 1993, Alan Greenspan made an amazing statement at a Fed meeting that has only now come to light:

"I have one other issue I'd like to throw on the table. I hesitate to do it, but let me tell you some of the issues that are involved here. If we are dealing with psychology, then the thermometers one uses to measure it have an effect. I was raising the question on the side with Governor Mullins of what would happen if the Treasury sold a little gold in this market. There’s an interesting question here because if the gold price broke in that context, the thermometer would not be just a measuring tool. It would basically affect the underlying psychology.”
--Alan Greenspan (05/18/93)

Less than three months later, on exactly Aug. 5, 1993, the (c)overt gold manipulations begin:

The appearance of the intervention in NY, repeatedly led by principal actors JP Morgan Chase and Goldman Sachs, is so marked that a particular day August 5, 1993 can be identified as the date of onset of the anomalous downward trade in gold on the NY Comex. [1]

How do we know the date when the systematic interventions began? By observing their execution times. These actions are not divided evenly throughout the day, but instead tend to focus on important time points such as the PM-Fixing and the New York closing price. Additionally, COMEX trading hours are preferred. This creates an intra-day pattern that can be statistically identified and allows us to pinpoint the starting date of the interventions on August 5, 1993 (*). [2]

Robert Rubin
Of course Robert Rubin joined the team as Treasury Secretary on January 11, 1995, promoting Larry Summers to Deputy Secretary. This lasted until July 2, 1999 when Summers took over Rubin's job as Secretary of the Treasury!

A few years ago a man named Frank Veneroso did some amazing reseach on the mid 1990's and the gold market. This report is a must-read. Here was his conclusion about the mid-90's:

What are the implications of all this dry statistical analysis for the claims of GATA? To our mind, it is very simple. There is much evidence that the consensus data on supply and demand is wrong and that the supply coming from the central banks is higher than the consensus estimates. In our opinion, the fact that the central banks do not acknowledge this but simply keep affirming the consensus data---despite abundant evidence to the contrary---represents considerable support for the allegations of GATA that there may be something deliberate and intentionally clandestine about the large flows of official gold that have been depressing the gold price.

Now, with all of this context in mind, let's take one more look at Rob Kirby's "conspiracy theory"...

Roughly 15 years ago – during the Clinton Administration [think Robert Rubin, Sir Alan Greenspan and Lawrence Summers] – between 1.3 and 1.5 million 400 oz tungsten blanks were allegedly manufactured by a very high-end, sophisticated refiner in the USA [more than 16 Thousand metric tonnes]. Subsequently, 640,000 of these tungsten blanks received their gold plating and WERE shipped to Ft. Knox and remain there to this day.

Can you see now how his mention of Rubin, Summers and Greenspan caught my attention? I am still a little skeptical of the details, but the story sure seems to fit. It will be interesting to watch what else develops.

Clash of the Titans

I mentioned earlier that I would talk about why I believe that more information will definitely be forthcoming if this story is indeed true. Well, here it is.

Us little people (the Lilliputians) tend to believe that "the Giants" have a master plan for controling us and stealing everything we have. This is simply not true, hard as it is to believe for us lilliputians. Just because things work out a certain way doesn't mean it was planned just that way. Yes there are many evil plans. Yes there are some really bad guys. But with all the players in the global scheme of things the law of probabilities says that some will come out way ahead and be dubbed... "the masterminds".

But the way it works in reality is that there is a battle royale raging between these "Giants". I call it the Clash of the Titans. And in this tungsten story, as it stands today, one of these Giants has royally screwed another, and maybe many more.

Any Giant sitting on a hoard of 400 oz. LGD bars today as his personal wealth reserve is checking them out very closely. Count on it! And this includes some very large investors in GLD (among other ETF's) that were certainly not "in on the scam".

So keep your eyes peeled for relevant stories and please post them here. I don't have time to read everything. Like I said in my linked comment above, "if this duped buyer found out what he had, he might be inclined to keep it a secret until he could unload the bad bars on someone else." But now this strategy has changed. Now that Rob Kirby has published his articles, these "duped buyers" will come to the conclusion that it is better to blow the lid off this scam and go after the perps.

My Conclusion

It has been speculated by many people over the past decade that once we are in the heat of the fire the US Treasury's gold will be employed in defense of the dollar. Perhaps this was what some of the Giants were counting on. Before 1971 the dollar was considered to be "good as gold". Since then it was considered to be "hard currency" amongst a world full of soft currencies. Perhaps now it will be considered to be "Good as Tungsten"? I wonder how this will affect the next move from the People's Republic of China. Hmm....